PwC: Namibian Withholding Tax has tax implications

By Rob Starr, Content Manager, Big4.com

PwC warns a withholding tax in Namibia is expected to place an increasing tax burden on multinational companies who provide business consulting and management services to Namibian entities . Namibia introduced a 25% withholding tax on payments to non-residents of management, consulting, entertainment and directors’ fees with effect from 30 December 2011. The requirement to withhold tax applies to Namibian residents including companies incorporated or managed and controlled in Namibia, as well as natural persons ordinarily resident in Namibia.

Elandre Brandt, International Tax Director and Leader of the Africa Desk at PwC in Johannesburg comments:

“The withholding tax, which is considered to be among one of the highest tax rates in Africa, may also have the effect of discouraging foreign multinational companies from providing business services to Namibian entities.”

The Namibia/South Africa DTA, provides that income derived by an individual who is a resident of South Africa in respect of professional services or other activities of an independent character shall be taxable only in South Africa unless he has a fixed base regularly available to him in Namibia for the purpose of performing his activities. Domestic relief from double taxation is available under the provisions of the Namibia/South Africa DTA. This means that South African residents, who derive income or capital gains and are taxed in Namibia, shall be allowed a deduction from the tax on income or capital gains payable in South Africa. The deduction will be equal to the tax paid in Namibia, subject to certain limitations according to PwC.

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